Budget 2014 reaction roundup

After the Chancellor of the Exchequer, George Osborne, released his statement for the 2014 Budget, companies from within the industry have been commenting on certain aspects of the budget.

NHBC’s Chief Executive Mike Quinton, said:

“We welcome today’s announcement which places the house building industry at the heart of the Budget.

“Although our statistics show that new home registration numbers went up by 28% in 2013 compared to the previous year, it is vital to recognise that the recovery is from a low base and numbers remain well below pre-recession levels.

“The Chancellor’s announcement to extend the Help to Buy scheme, which has already given the sector a welcome boost, until the end of the decade will give tens of thousands of people the opportunity to own their brand new home.

“Help to Buy has given the UK house building industry a shot in the arm. The extension now provides much-needed certainty and confidence for it to plan for the future.”

The British Property Federation has welcomed the three year extension of business rates discount and Enhanced Capital Allowances for Enterprise Zones announced in today’s Budget.

Liz Peace, Chief Executive, British Property Federation, said:

“Many in the development industry felt that the long term aim of Enterprise Zones to attract investment and jobs was being hindered by short-term nature of the financial incentives on offer and that the Government simply had an unrealistic view of the time it takes to get regeneration projects underway. The Chancellor’s decision to extend business rate discounts and enhanced capital allowances in Enterprise Zones for a further three years is, therefore, very welcome. It will mean that any company setting up in an EZ before 2018 will now benefit from the rating discount. However, the BPF believes that Government is likely to have to come up with more substantial incentives if growth is to take off in the more challenging EZs where demand remains very subdued.”

“We welcome this announcement and have always supported the principle of New Towns and Garden Cities, and believe that they have the potential – in the longer term – to contribute significantly to the desired housing figures. We support the introduction of an Urban Development Corporation. This would be a good opportunity to reconsider the exclusion of residential sites– and therefore Garden Cities or urban extensions – from the Nationally Significant Infrastructure Regime. We would like to see the NSIP regime extended to include residential, as currently large schemes with any element of housing (or retail) that have the greatest potential to stimulate growth lose out on the benefits of the regime. This ultimately leads to stalled development and is contradictory to the advocation of mixed-use schemes that is set out in the NPPF.”

She added:

 “We are pleased to see an increase in HMRC’s strained budget, an issue we highlighted in our Budget submission. Increasing the resources to the government department best placed to deliver additional revenue should also enhance policy making and allow the successful ‘CRM’ model (which currently only benefits large businesses) to be implemented more widely.”

“We are pleased to see that the Government is committed to spending on flood defences and helping those that have been hardest hit by the recent storms, but today’s announcement of £140m funding to repair flood defences do not assuage our fears about the government’s new flood insurance scheme, Flood Re, which currently stands to expose thousands of homeowners to rocketing insurance premiums. As things stand, the scheme will prevent one-third of homes from accessing affordable buildings insurance, and we would like to see an extension of the scheme cover larger leasehold blocks of over three properties, the private rented sector and small businesses to ensure that where defences do fail, they still have the security blanket of flood insurance to help them on the road to recovery.”

In light of construction announcements made in the 2014 Budget, Chris Temple, PwC UK engineering & construction UK lead, commented:

“House building needs a significant push, so it is good to see the £500 million investment into small house building firms, which has obvious employment connotations too. However, space is at a premium, especially in London and the south-east, where the Chancellor identified a specific need for new housing. To really kick-start the industry, I would like to see greater incentives for public and private landowners to sell sites to developers.

“There was a definite focus on first-time buyers in this Budget announcement, with plans for 200,000 new homes to be built nationally meaning good news for those interested in the Help To Buy scheme, both developers and purchasers. The confirmed new garden city in Ebbsfleet will be of great appeal to young professionals looking for a property in the commuter belt. The £150 million investment for people to build their own homes works well in parallel to the Help to Buy scheme – perhaps now people looking to get onto the property ladder will consider buying a plot at auction and starting from scratch?”

Phil Nicklin, real estate tax partner at Deloitte, said:

“The Government has announced the extension of existing measures to tackle perceived tax avoidance by those acquiring or owning residential property within wrappers. This will further discourage investors from ‘enveloping’ residential property within companies or other vehicles, rather than owning them directly.

“The ATED lower-limit will be reduced from £2 million to £500,000 over a transitional period. The related capital gains tax charge for disposals of properties liable to ATED will also be extended. In addition, the 15 per cent SDLT rate that applies to residential properties purchased by certain companies or other vehicles will also be extended to properties purchased for over £500,000.

“These measures, which don’t apply to properties that are rented out on a commercial basis, will act as a disincentive to investors using wrappers to invest in residential property but leaving it empty or under-used without paying tax.”

Ian Liddell, head of development at consultancy WSP commented:

“Any measures to support house building are of course welcome, but today’s Budget announcement of provisions for 200,000 new homes falls short of demand for the coming year and must be seen as platform for other increases in years to come. Extending the help to buy scheme until the end of the decade will help ensure the housing market recovery continues and spreads beyond London, but the real issue is delivery, specifically the capacity of the industry and its supply chain to deliver on projects.

“In terms of garden cities, the creation of a development corporation for Ebbsfleet is positive but early evidence of genuine progress is very important if this is to be a pilot for other garden cities to be brought forward. The benefits of this approach should be evaluated against real housing delivery; it will be interesting to see if it can be an effective model.”

Walter Boettcher, Colliers International, Chief Economist & Forecaster commenting on today’s Budget said:

“Measures to entrench an incipient rebalancing of the UK economy through investment incentives, export support and energy cost relief are all well targeted, by the Chancellor. From a property perspective, measures to stimulate development of a new generation of business space capable of accommodating this expansion, would have been equally welcome. Lack of quality and technically sophisticated space UK wide may well act to dampen the potential upside of increased investment in manufacturing and export. Perhaps the extension of the Help to Buy Scheme should have been accompanied by a Help to Spec scheme.

“Liberalisation of personal investment and pension vehicles, especially in relation to annuity requirements, has the potential to give rise to a whole new generation of investment products targeted to the evolving needs of future retirees. Given Solvency II and other regulatory threats to existing pensions and insurance providers, the implications for property allocations are potentially large if yet unknown. One possibility, is a movement away from traditional pension fund investing and into direct small scale private property investment. This also presents interesting possibilities for PRS and related schemes, and raises questions over home ownership in the UK.”

The Royal Town Planning Institute (RTPI) has called for the Government to drop its proposal to pilot financial incentives to individuals to accept development, contained in the Budget. With 23,000 members worldwide working in the public, private, charitable and education sectors, the RTPI is the largest professional institute for planners in Europe.

Janet Askew, Vice President of the Royal Town Planning Institute, said:

“The Royal Town Planning Institute feels that paying individuals directly to accept development is unsupportable. Whilst it is hard to object to pilot schemes, there are better uses of limited resources. The RTPI urges the Government to deploy its time and effort to look at potentially more effective ways to get homes built.”

“Incentives for individuals to accept development have a number of drawbacks. Proposals that extend an incentive-led approach to individuals may lead to developing areas with fewer objections, rather than identifying the optimum location for communities. They send a signal out from Government that new homes are something which requires compensation, rather than something which addresses need. It is not clear how such incentives would work in relation with other mechanisms to mitigate impact such as section 106 agreements and the Community Infrastructure Levy.”

Mark Robinson, group chief executive at Scape, said:

“We are introducing our new infrastructure/civil works framework which means we will be well placed to support local authorities to tackle issues such as flooding and potholes as efficiently and cost-effectively as possible.

“With plans for austerity measures remaining in place through to the end of the next Parliament, we will ensure we help public sector bodies to deliver greater efficiencies from their capital programmes.

“Scape’s services are optimised to deliver quality and affordable new residential developments and we welcome the additional funding for housing which has been pledged. These are very testing times for public sector bodies and our work is determined to maximise best use of their budgets and increase efficiency.”

David Mann, Executive Partner at TFT, said:

“The measures announced in today’s budget, such as the extension of help-to-buy, only focus on increasing demand for new homes. However, severe supply constraints are limiting the construction industry’s capacity. The gap between rising demand and the lack of supply of new homes to fill it will add to further house price increases, particularly in London and the South East.

“Supply constraints arise from the fall out of the downturn. There is a skills shortage owing to retrenched skilled workers being permanently lost to the sector, who have not yet been replaced. This is combined with a backlog of planning applications arising from slimmed down local authority planning departments. Added to this are shortages and long delivery lead times of materials such as bricks and tiles as manufacturers permanently closed or mothballed plants across Europe and the UK. The increased demand and lack of supply of these basic building materials is pushing the cost of construction upwards too.”

A spokesperson for the Mersey Gateway project said:

“Today’s announcement from the Chancellor that the government has confirmed a £270million guarantee to support the project is great news.

“The Government is now guaranteeing around 50% of the senior debt required to finance the project with the remainder being provided by the project finance market. This decision clears the way for financial close, (when contracts will be awarded and all finance committed) and we expect to achieve this in the very near future. Once we have completed this, more details of the financial arrangements and funding will be confirmed and announced.”

Preparations are taking place to allow construction work to commence in the coming weeks.”